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Saturday, May 24, 2014

One logical way to get vendors to collect use tax

For decades, states have sought ways to get remote (non-present) vendors to collect sales/use tax when they sell to customers in the state. States have been pushing Congress to provide assistance and many have enacted laws to broaden their nexus reach (see a nice list from Sylvia Dion here; my list needs updating but links are useful).

I've been researching, writing and testifying on this topic for many years. One of my suggestions has been to only let the state and its agencies purchase from vendors that are registered with the state to collect sales tax. That is, if a vendor wants to have the state or any of its agencies be a customer, it must register to collect sales/use tax.

Before California enacted its "Amazon law" in 2011, I always thought it was odd that my employer (the State of California) did not mind that I purchased books, such as for speaker gifts or students, from Amazon.  Of course, I paid the use tax since it was on my credit card and then I got reimbursed (perhaps the State paid the tax as well).  (And, I've been paying my use tax obligations since long before there was even a line on the state income tax form.)

I see that Missouri has a law that any vendor that wants to do business with the state must register to collect use tax even if it has no physical presence in the state.  Here is an excerpt from its website:

"Vendors Contracting with the State of Missouri Must Collect and Remit Sales/Use Tax
      Any vendor and its affiliates selling tangible personal property to Missouri customers should collect and pay sales or use tax in order to be eligible to receive Missouri state contracts, regardless of whether that vendor or affiliate has nexus with Missouri."

Why don't more states do this? It only seems fair and logical - if a vendor wants to do business with the state, one of the requirements should be registering for sales tax. Why should the state do business with a company that doesn't collect sales tax for the state? 

What do you think?

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